Episode 16 – How to Start Investing and Europe FIRE Tools

Our second Friday episode! We asked the Reddit and Facebook groups for questions and got an amazing response – today we discuss how to get started with investing as a beginner and some awesome resources for us Europeans to reach FI in Europe.

Getting started with investing

A great question from PF212 on Reddit! He asks the following:

How do I get started? I have opened a DeGiro account, but I have no idea what to do next! There’s a lot of information in regards to comments suggesting “buy bonds/ETFs/indexes/etc. – but I have no idea which ones to go for?

A really great question, and one we all face when getting started on our own personal FI journeys. It’s especially confusing for us Europeans – there’s plenty of info out there for Americans to get started, but for Europeans it can get a bit tricky.

I (Araminta) start off this answer with my own personal experience: start simple and take one step at a time.

I literally only started a year ago, and it’s taken me some time to learn how to invest properly, where to start, etc – and I’m a personal finance blogger and FI podcaster. But as Barney says in one of our latest episodes, you want to start simple and celebrate the small wins. Although the process will be slightly different for every country, I put together some generic steps anyone can follow to get started with investing:

Identify a tax efficient investing vehicle

This means figuring out what your country offers to protect yourself from taxes. In the UK we have the ISA, in Switzerland they have a Fisca and in Spain you do this through a pension plan. What does your country offer?

CHEAP, GLOBAL, INDEX FUNDS

Index funds mean you buy the entire market instead of just one stock. This means if one company goes bankrupt it’s quickly replaced by a new company. Index funds return an average of 7%, are passive and very simple to use. Open an account with a brokerage through your ISA/pension plan/country’s equivalent and look for funds with:

The words: global and index fund

LOW FEES

Check the details of the fund for those words and double check the fees. Vanguard is famous for having very low fees (0.22%) and some great global index funds. Some examples are their LifeStrategy fund and Global All Cap Index Fund. As long as they have those words and are cheap, you can pick any one you wish.

Monthly contributions

The best way to build up your nest egg is to keep investing every single month. This means setting up a direct debit or an automated transfer the minute you get your paycheck. Calculate a percentage that you’re comfortable with investing, and then ask your bank to send that percentage every month. This will build up your portfolio quickly and efficiently (and with literally no work involved).

Go pro

Once you feel comfortable with your monthly contributions and with how you’re investing, then you can decide to go pro and try some new investing strategies. But it’s important to start simple and easy – when I started I wanted to try everything at once which got me overwhelmed and then I pretty much did nothing. Educate yourself, read some FI blogs, talk to other people, listen to more of our episodes ;). Then you can decide to go pro (tons of resources in the next question!)

Mathias tells us how he started investing with stocks and startups (crazy!) and then once he financially educated himself, realised it was better to do low risk index funds and ETFs. We have a bit of a discussion on what the difference is between the two and we come to this conclusion:

ETFs:

More flexible and specific (e.g. can decide to buy only Asian stocks, only Tech stocks, etc)

Can buy and sell an ETF (which means more fees)

Index funds

Less choice

Can’t go wrong with them

Both ETFs and index funds are a great way to diversify and invest low risk – however, as a beginner I recommend starting with index funds because it’s less confusing; with whichever you pick you can’t really go wrong. ETFs and index funds are interchangeable, so it’s more up to you!

If you disagree or have a different opinion we would love to hear what you think (we’re not financial advisors or experts!), so drop us a comment below letting us know 😉

European FIRE tools

This is another question a lot of Europeans have; what’s the European equivalent of Personal Capital, Mint, Betterment, etc?

With this, we got another awesome question from Reddit:

I’d be interested in platforms to plan your way to FIRE like OnTrajectory. Also FIRE tools targeted at the European market instead of existing tools primarily targeting users from the US.

Alvar

Alvar brags (rightly!) about how little time he spends organising his budgets per month. He tells us he sits down once a month with his girlfriend and they go through their spreadsheets and do an overview of their journey. Something like a budget party (cooler than it sounds). Here are the resources he uses:

As he says himself, Mathias is German and into finance – we call him the spreadsheet master. He has one chart for his net worth, one for his asset allocation and one to calculate how much he saves. He tracks every strategy he uses, every buy, sell and dividend transaction and then puts it into a program so he can even check it out on his Smartwatch. Yep, a proper spreadsheet master.

He says there are some benefits to spending 2-4 hours a month preparing and analysing spreadsheets; you check your balances, it keeps you on top of your money and you learn a lot. A good point.

As mentioned before, I literally only got started in this personal finance world about a year ago and so am still adjusting and adopting new techniques and strategies. But I’m finally happy to have found a method that works for me when it comes to budgeting: I link my bank account to a budgeting app, and control everything from there. I set a percentage to go to investments. Then, once a month I spend 10 min slotting the numbers into a spreadsheet so I can easily compare month to month.

The complicated part about Europe is that it’s hard to recommend resources that work for every country. So my number one piece of advice, as always, is financially educate yourself as much as you can so that then you can personalise your own FI journey with the tools that best work for you. Here are some that I use:

A lot of actionable advice and tips in this episode – we hope it’s somewhat useful! We’ve got quite a few questions now for the next few Friday episodes, but we would still love to hear from you. If you want to send us a question check out the big button that says ‘Send a voicemail’, or send us an email at financialindependenceeuropeATgmail.com. You can also sign up to our newsletter and responses to our emails will get priority over others 😉